Productivity is Up, and the Nasdaq is Down

The Dow continued to rally for the seventh day in a row, but the Nasdaq lagged behind, in spite of the great US productivity data for the second quarter. Appleis stock sank to a recent support level.

Many believe that todayis weak tech sector was due to investor caution ahead of Ciscois (CSCO) earnings announcement which was released after the markets closed today at $0.16 per share, better than the forecasts for $0.15 per share. The networking giant reported sales revenues at $5.72 billion well above the $5.2 billion consensus forecasts. Cisco has never missed quarterly earnings estimates.

Year over year productivity is increasing at a 6.9% pace, the fastest rate since 1971. The US economy is experiencing a productivity boom as high tech innovations revolutionize the way business systems from management to the factory floor are organized. Much of the credit goes to the computer hardware and software industries which have evolved at a faster pace than the rest of the economy and in doing so have pioneered more productive business models and tools.

Apple sank 1 3/16 to close at 46 3/4 on volume of 3.1 million shares.

A bullish article by Mitch Ratcliffe on the future of Palm Inc. (PALM) mentions Apple:

"The interface for wireless communications is totally undefined at this point. There is the Wireless Application Protocol, which displays text and limited graphical elements of a Web application on a cell phone -- and it is not a great tool when all is said and done...Which leaves the dominant handheld interface, the Palm OS. With more than 80% of the market, this is the potentially dominant platform for wireless devices. Since defeating Appleis Newton, the Palm OS has proliferated and, for all intents and purposes, is the only OS developers can write applications for with expectations of a large market, today."

The Nasdaq fell 14 points (-0.37%) to close at 3848 on volume of 1.4 billion shares. Technical analysts believe the Nasdaqis 200-day moving average at 3907 is a critical target for the index to break above this week. Biotechs and telecoms led the way down today.

The Dow climbed 109 points (1.01%) to close at 10976 on volume of 992 million shares. The Dow hasnit been above 11,000 since April 25th.

Home builders and building material suppliers are experiencing a strong rally off recent lows, while the financial stocks, on a run for weeks now, are running out of steam. Retail and cyclical stocks seem to be staging a comeback, perhaps indicating that many investors find the Fed Chairman Alan Greenspanis "soft landing" scenario for the economy increasingly credible.

The S&P 500 climbed 3.48 points (0.24%) to close at 1482.80.

In Apple related businesses: Akamai slid 2 5/8 to 74 1/16. Earthlink fell 9/16 to 11 3/16. Motorola lost 1 1/4 to 34 3/4. IBM climbed 2 13/16 to the low end of a tough resistance zone for Big Blue since December at 119 dollars per share.

Adobe fell 5/8 to 121 7/16 on the news that Microsoft has decided to define the emergent electronic book software standards in competition with Adobeis Acrobat Reader portable document format (PDF).

Shares of Microsoft soared 4 1/8 to 74 1/8. The Wall Street Journal reported this morning that Microsoft is aggressively buying its own stock back at current levels. Meanwhile, the electronic book software launch by Microsoft and is being herald as a paradigm shifting moment for the publishing industry.

Appleis competitors: Dell lost a dollar to 41 11/16. Gateway was higher by 1/8 to 59 7/8. Intel fell 1 5/16 to 61 5/8. Hewlett Packard climbed 5/8 to 115 15/16.

Compaq climbed a dollar after Andrew Neff of Bear Stearns said it was a good time to buy Compaqis stock yesterday.

In economic news: The Labor Department reported nonfarm productivity, as derived from worker output per hour, climbed from an annual rate 1.9% in the first quarter to 5.3% in the second. Higher productivity pushed the labor cost per unit of goods or services produced down to 0.1%, surprising economists who had expected unit labor costs to increase 0.5% after climbing 1.9% in the first quarter.

The Wall Street Journal commented, "Although wage and compensation expenses have been creeping steadily higher amid one of the tightest job markets in U.S. history, sharp productivity advances have helped to keep the higher costs from translating into widespread price increases. The productivity reports suggests that those advances, which allow companies to pay higher wages without having to raise prices, may be continuing."

The Mac Observer Stock Watch Virtual Portfolio Lucent fell to a new 20-month low today at 40 3/8 as many telecommunications giants broke down. Worldcom (WCOM) and AT&T (T) also hit new 52-week lows.

For full quotes on all the companies mentioned in this article, we have assembled this set of quotes at Yahoo! for your reference. For other stories regarding Appleis stock activity, visit our Apple Stock Watch Special Report.